Social Media's Now A Fashion Business

Recalibrate what you think you know about what social media companies are worth, because social media’s now a fashion business.

Snapchat Girl (Photo credit: Ted Murphy)

Say, Evan Spiegel, Snapchat CEO -- that $3 billion dollar bid for your company from Facebook (NASDAQ: FB) that you just scoffed at? You do realize that valued you as an important, user-sticky, relatively permanent social media site, right? But…you also realize you’re not that, right?

No?

Ouch. Well that’s going to cost you some sleepless nights about sixteen months from now when you hear the bathtub-drain sound of the teen cultural zeitgeist that you rode to prominence gurgling away from you. Because you’re going to learn, in the most personally agonizing way, what the difference is between fashion industry valuation and universally necessary and profitable Internet website valuation, and how it feels to glissade down the icy mountainside from one to the other.

Ever since
Google (NASDAQ: GOOG) managed to augur itself in to the world’s commerce stream as an indispensable and nearly ubiquitous sine qua non of the Internet, the goal of virtually every Web startup – including the later-arriving waves of social media startups --has been the same: Become a Platform.

The eBays and the Amazons and the Craigslists achieved it in the Pre-Social Era. And of course Facebook traveled from “Why would a grown man possibly be on Facebook?” (a question I was actually asked by my co-founder at my previous company after his daughter friended me on the site in 2008) to the digital equivalent of a sandwich: Something taken for granted due to its prevalence, utility, and tasty, tasty user interface.

The assumption we’ve all been making, watching the behavior of our teen-aged kids/students/babysitters was initially that they were simply the leaders and we were the followers. Then we began to assume, as we all observed our 14 year old daughters and everybody’s teen something abandoning Facebook over the past few months, that they were migrating away to Twitter and Snapchat and Vine because Facebook itself had become uncool and they preferred a more “just us” zone of hipness in which to interact.

New social media sites are like hip restaurants, which rise from the pedestrian flow of food service drudgery to become a place to see and be seen. What was wrong with the old restaurant – the one that was a “hot table” where your presence announced to the world that you had inside knowledge, great taste, an adventurous spirit and an ability to get the reservation no one else could? I’ll tell you – that joint went all Facebook the day that you ran into your accountant there.

Or maybe new social media sites are more like that brand of athletic shoes that were initially home-sewn by bicycle messengers before getting picked up by a Pearl District boutique in Portland and then showing up on Shia LaBeouf in that StyleBistro photo series. What was wrong with the ones that were hot last year – the ones that were created by those craft-brewery employees in Boulder and flashed by Emma Watson as she strolled through Soho? Well, turns out they were so over by the time they made it to Modcloth that no one felt they could be seen in them again.

Or, in the case of social media, staying connected and sharing information, another basic human need. Tribal drums, smoke signals, printed handbills, newspaper personal ads, bulletin boards, telephones, CB radios, chat rooms, Friendster, MySpace, Facebook, Snapchat. Some of those were profound shifts – platforms, if you will. But now the shades of gray are growing closer and closer together. One fashion innovation may be a little stickier and newer (Facebook comes to mind) and therefore has a little broader impact and sticks around a little longer (than, say, MySpace did), but that doesn’t mean it was a permanent, gotta-have-it “platform.”

It does mean that with many universal, basic needs, human beings like to avoid boredom. Don’t want to eat the same thing every day. Don’t want to wear the same thing as everybody else. So we turn to fashion. That which started as a wonder (I have my own Wall! I get reminded about everybody’s Birthdays!) will eventually dissolve into a miasma of “I can’t believe my frigging grandmother is on here same as me now.”

Where the ultimate deliverable is necessary and unchanging – shelter, sustenance, entertainment, connection – fashion exists to satisfy our natural human curiosity, allows us to exercise our preference for novelty, lets us make statements about how different and discerning we are through our very presence or possession, and in some small way contributes to our happiness and utility.

And What's So Bad About That?

There’s not a damn thing wrong with it or bad about it. But what’s it worth? Now that’s a different story.
Ralph Lauren’s forward PE is just over 17; Facebook’s is 44. Snapchat’s, while private, is by definition mathematically undefinable -- and quite likely to stay that way, since its turn in the sun is drawing to a close. McDonald's is just over 16.

So there's a difference. And all those "pedestrian" companies have been making money, and lots of it, for decades.

Mistaking a material innovation in fashion (Facebook) for technological innovation that spins up real, sustainable barriers to entry (see Google, Amazon, or for that matter, Dupont or Merck or Monsanto) and then valuing it the same way is like saying Crocs should be valued by the same metrics as Samsung, or that Miley Cyrus will drive just as much economic value as Sergey Brin. It’s not like comparing apples and oranges – it’s like comparing apples and octopi. It’s fundamentally different.

So will my three year old son be Snapchatting with his pretty 8th grade classmates a decade from now? Will we think 140 character text strings are cool when bioengineered implantable chips allow us to send thoughts directly to the hippocampus of everybody who’s “brained” us on Cerebrumbook.com? Will Path or Ban.jo or Medium adoption go as well in the Martian colonies in 2030 as it did in Austin and the Mission District last week?

Probably not.

Fashion’s a good business. Sometimes. But it’s not a hyper-valuable business. It is, by definition, here today and gone tomorrow, ridin’ high in April and shot down in May. I’d suggest valuing it accordingly.